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The Carval HR Software Blog

Making Tax Easier and the launch of HMRC's Digital strategy

Posted by Jason Sweby

08/09/15 09:45

Jason Sweby, payroll software provider Carval Computing Limited's Technical Director, reports on HMRC's first major Software Developer Conference, held on Monday 7th September 2015 at The Royal Society, London.

HMRC have held seminars, consultancies and workshops with tax software developers for many years, but this was the first major Software Developer Conference aimed at bringing everyone together to help shape the next step in its Digital Strategy. 

Photo of Jason Sweby, Carval Computing LtdThis strategy began back in 2001 with the advent of the "Electronic Exchange", a service whereby third-party accounting and tax software could data electronically to the revenue using standard internet protocols, data which had previously been submitted by manual forms. For payroll, this included End of Year filing (EOY), In-Year Movements (MOV, P45 and P46s) and P11Ds. The EOY and MOV services were permanently replaced in 2013 by RTI.

Another part of HMRC's digital exchange is still widely in use today, the Data Provisioning Service (DPS). This is the mechanism whereby HMRC can send information to employers directly, regarding day-to-day payroll matters such as P6 and P9 notices of coding change, Student Loan notices and other messages and warnings.

Despite RTI being such a significant change in relationship between the employer and HMRC, technically it uses the same architecture as EOY filing used in 2001. That is to say, although the concept of "real-time" data seems more modern, the technology behind it has remained the same. This is not a problem, in my view, as it remains a common, secure and widely accepted internet standard and, more importantly to its thousands of users, it "just works". 

Compared with other government departments, HMRC leads the way in this field. More than two-thirds of digital transactions submitted to the government are to the revenue. In plain figures, this totals over 1.1 billion per year. 

Previously outsourcing their digital platforms, HMRC were never considered "agile". Often, if a problem was discovered in the internet filing process, a fix would not be rolled out for 6 months. Now, HMRC are looking to change this and modernise the technology. 

Their new plan is a bold one: to bring it in-house and make almost all (except the most secure) aspects of personal and business tax available as Web Services. These Services can be used by software developers to quickly, easily and securely access operations that have previously been only available inside the walls of the revenue. In fact, these services will be the same ones that HMRC use themselves. By making them publicly available, software developers can add innovative new features to their payroll or accounting software that harnesses the power of real-time information both ways, not just one-way traffic. 

As now, software developers must register their intent to use these Services with HMRC and will be given special identifiers with which to access the services, so security will not be compromised. 

By allowing us to access these services, we can provide more relevant and timely data to you in the software, and the revenue hope to see a sharp increase in the accuracy and, ultimately, the value, of tax payments. 

Most interestingly, they have a vision of allowing third-party financial software to also communicate with these services. So, for example, and only if you allow it, you could allow your banking app on your smartphone to send details of any bank interest to HMRC; or, if you have investments in stocks & shares, any dividends arising from those. Even if they are honest, compliant citizens, whether people trust the government with this level of their personal life remains to be seen. 

This ties in with the other main thread of the conference, "Making Tax Easier". The idea behind this initiative is to reduce the burden on the tax payer when it comes to our tax affairs with HMRC. Ideally, we would all have a tax account online, and, unlike now where we have to keep telling them the same information over and over on an annual tax return, much of the information will be "pre-populated", awaiting your confirmation (e.g. that bank interest from your smartphone app). This can take place throughout the year, so that HMRC can calculate your tax liability in a more timely fashion and prevent the mad 31st January rush and panic. 

The Financial Secretary to the Treasury, David Gauke MP, officially launched the strategy at the conference, lending weight to how seriously the government is taking the HMRC Digital Transformation initiative. It is, after all, in their best interests if it means they can close the "tax gap" and raise more revenue. 

Of course, many of these new services will not be mandatory in software, but, if implemented, will offer employees and employers a real-time glance at their current tax liability, amongst other things. Of great interest (and some concern), to the dozens of software developers present, was the announcement that the current XML method of submitting RTI would be gone in 5 years time, replaced by the new web services. This brings a certain burden to the 600+ tax software developers in the UK that may not be so welcome. 

Some testing starts later this year with more to follow by April 2016, so don't expect any great movement on this front for the next payroll software release.

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